2016 will forever be remembered as the year of the Brexit vote and Donald Trump’s election as US president. Both events sent shock waves through financial markets and will have repercussions for businesses in the year ahead.
Even without the political turmoil, 2016 was a dramatic year for business leaders. The collapse of BHS led to intense pressure on Sir Philip Green and demands that he fill the £571m hole in the store chain’s pension fund, while Mike Ashley was summoned before MPs to explain the working practices the Guardian had exposed at Sport Direct’s Derbyshire warehouse.
The annual general meeting season started with a bang when two FTSE 100 companies – BP and Smith & Nephew – had their pay schemes voted down. There were also big events in industry, with Nissan securing a post-Brexit deal, approval for the Hinkley Point C nuclear power station and concerns over the commitment of Indian company Tata to its UK steel plants.
So as the year draws to close, who were the winners and losers in the business world in 2016 – and who has most at stake in the year ahead?
Losers
No sooner had 2016 begun, that Marc Bolland, the chief executive of Marks & Spencer, announced he was leaving. His successor, M&S lifer Steve Rowe, scaled back the retailer’s international expansion and announced plans to close stores and convert 45 sites into food-only outlets. By the end of the year, Robert Swannell, the chairman, announced his retirement.
It was not long before another chief executive, Katherine Garrett-Cox also left. She walked away from the investment trust firm Alliance Trust in March when her role became obsolete in a restructuring that followed a long-lasting tussle with activist investors. By the end of the year, the Dundee-based firm outlined a dramatic plan to outsource the management of its investment funds.
Ruby McGregor-Smith stepped aside after a decade running outsourcing company Mitie. The company said she had doubled profits and revenues during her tenure – but the shine was taken off by a profit warning three weeks earlier that knocked 25% of the share price. Phil Bentley, who used to run British Gas and Cable & Wireless Communications, took over.
Bosses at a string of companies faced revolts. Besides BP and Smith & Nephew, companies as diverse as engineering group Weir, Shire Pharmaceuticals, estate agent Foxtons and betting company Paddy Power Betfair were also subjected to pay rebellions.
Ashley’s problems began at the end of 2015, when the Guardian revealed how his retail empire was effectively paying below the minimum wage. He spent 2016 dealing with the consequences. The Newcastle United owner was hauled before MPs, and at an open day at his warehouse in Shirebrook, Derbyshire, he stunned observers by producing a wad of £50 notes from his pocket during a security check. The company’s shares have crumbled from about 570p to below 300p. There has been better news for Sports Direct workers, who have been promised back pay.
For BHS workers, though, the news was dire. In August, BHS tores closed their doors for the last time after 88 years of trading. A parliamentary inquiry was looking into why the chain collapsed barely a year after being sold by Sir Philip Green to the thrice-bankrupt entrepreneur Dominic Chappell. A damning report by MPs concluded the business had been subjected to “systematic plunder” by former owners. MPs voted to strip Green of his knighthood, although the vote was purely symbolic and carried no official sanction. A deal to plug a £571m deficit in the pension fund is yet to be secured.
Navinder Singh Sarao spent most of the year fighting extradition to face charges that he had been “spoofing” markets from his parents’ house in Hounslow, west London. Eventually extradited, Sarao appeared in a Chicago court and pleaded guilty. Martyn Dodgson’s conviction for insider dealing was secured using evidence from bugged offices, CCTV images and a crucial password of “Lamborghini55”. The former Deutsche Bank managing director was jailed for four and half years. His friend Andrew Hind was jailed for three and half years for acting as his middleman. Three others were acquitted.
Four former Barclays bankers were sentenced to between 33 months and six-and-a-half years in jail for conspiring to rig global benchmark interest rates. Just before Christmas, former BlackRock fund manager Mark Lyttleton was jailed for a year after pleading guilty to insider dealing through a Panamanian company in the name of his wife.
The pound plunged after the vote to leave the EU and is down 15% against the dollar, a fall not helped by October’s “flash crash” when the currency dived to new 31-year lows.
Winners
Andrew Bailey’s year started with his unexpected appointment as chief executive of the Financial Conduct Authority. Poached from the Bank of England, where he was one of the deputy governors, Bailey made a number of eye-catching moves after taking the helm in the summer. Crowdfunding, the fund management industry, high-cost consumer credit and the spread-betting industry are in his sights.
Executives enjoyed big pay days. Sir Martin Sorrell, chief executive of advertising company WPP, received £70.4m in cash and shares. It was one of the biggest pay deals in UK corporate history – and was opposed by a third of the company’s shareholders. Simon Segars and Mike Muller at ARM Holdings shared a payout of £55m when the British microchip designer was sold to Japan’s SoftBank for £24bn. Angus Thirlwell and Peter Harris, the founders of luxury chocolate maker Hotel Chocolat, received £43m when the business was floated on AIM in May. And after a difficult 2015, Ivan Glasenberg, boss of mining company Glencore, had a good end to 2016 as the share price in the natural resources group rallied from from 85p to about 270p, boosting the value of his personal shareholding from £1bn to £3.2bn.
Carmaker Nissan secured a deal from the government to seek tariff-free access to the single market when EU exit negotiations start. The Japanese company announced it would turn its Sunderland factory into one of the biggest car plants in the world, saving more than 7,000 jobs.
While the news was good for Nissan workers, the prospects for workers at Tata Steel’s plants were mixed. The Scunthorpe works was saved by a rescue deal in June, led by Greybull, the family investment firm. In Port Talbot, workers are still awaiting confirmation of a deal with the Pensions Regulator.
The on-off Hinkley Point C nuclear power station was finally given the go-ahead after the government signed an £18bn contract with French utilities firms EdF and China to start construction at the site in Somerset.
The European commission fought back against complex tax arrangements by ruling a sweetheart deal devised by the Irish government had allowed Apple to pay tax of just 0.005% in 2014 and an average rate of 1% over many years. However, the competition commissioner, Margrethe Vestager, later said the full amount may not be payable to Ireland.
In the empire-building stakes, supermarket chain Sainsbury’s won control of Argos, Shire Pharmaceuticals took over Baxalta, ABInBev, the world’s biggest brewer, completed its £79bn acquisition of SAB Miller and as the year drew to a close, Rupert Murdoch’s 21st Century Fox lodged an £11.7bn bid to take full control of Sky. The London Stock Exchange and Deutsche Börse also announced a merger.
Ones to watch
Emma Walmsley
Even before she gets started as chief executive of GlaxoSmithKline, Walmsley is already being described as the most powerful woman in the FTSE 100. When she takes charge in March, Walmsley faces shareholders pushing for a breakup of the pharmaceutical business. Her background is in the consumer arm: Sensodyne toothpaste, Horlicks malted drinks and Panadol painkillers.
Paula Nickolds
Nickolds is taking over as the first female chief executive of John Lewis, replacing Andy Street, who has stepped down to run as the Tory candidate for mayor of Birmingham.
Nickolds, who once considered a teaching career, started as a graduate trainee at John Lewis in 1994 and climbed the ladder through buying roles in clothing and furniture, before becoming buying and brand director. In the latter role, Nickolds had responsibility for the all-important Christmas ad, including 2013’s bear and the hare animation. She was named commercial director last year, with responsibility for shops and product development.
It’s a big gig, running “middle England’s” favouite department store, but she is taking over at a tricky time: profits slumped 31% to £32m in the first half of this year as the chain struggled to adapt to the shift to online shopping.
Bali Padda
The Indian-born Briton is the first non-Dane to lead Lego, which has survived in the computer game era by expanding into film franchise merchandise such as Star Wars and Harry Potter. Prices in the UK will be going up 5% at the start of the year as a result of the Brexit-induced fluctuations in the pound. Padda joined in 2004 and has been promoted from chief operations officer.
Ross McEwan
The New Zealander who runs Royal Bank of Scotland will be hoping to reach a settlement with the Department of Justice over a bond mis-selling scandal and find a buyer for 300 branches that must be sold under state aid penalties imposed by Brussels. Until these are resolved, the Treasury will struggle to sell off its 73% stake in the bank. In February, RBS will announce its ninth consecutive year of losses – which have already topped £50bn since its bailout.
Sean Clarke
Already six months into his role running Asda, the UK arm of US retail giant Walmart, Clarke has inherited a business that has dropped into third place out of four big UK supermarkets. A Briton who has had a global career, Clarke will need to use all the expertise of the Walmart empire to fight back against the German discounters Aldi and Lidl. Asda’s selling point has been price. Clarke will need to find another reason to get shoppers through the door.
Sharon White
The head of media regulator Ofcom could be asked to examine the offer by 21st Century Fox to buy Sky and keep BT honest as it separates its Openreach unit, which controls the UK’s broadband infrastructure. Her profile is already rising: mobile operator Three is projecting an image of her as a cartoon superhero on to landmark buildings to encourage her to put a 30% cap on the amount of mobile spectrum that any operator can run.
Keith Hellawell
The clock is ticking on the former police officer’s tenure as chairman of Sports Direct. In September, 53% of the embattled retailer’s independent shareholders voted against his re-election to the role. In January, another vote will be called. He is likely to survive it – as this time 55% shareholder Mike Ashley gets a say – but he has pledged to stand down if the majority of independent shareholders vote against him at the next AGM.
Andy Parker
The boss of Capita ended 2016 on a sour note after the outsourcing company issued two profit warnings in three months. The blame is being placed on Brexit and problems with IT for London’s congestion charging zone. The shares dived to 10-year lows, putting pressure on Parker, who has been running the outsourcing company since 2014 and will want to avoid taking the axe to the dividend.
Marco Gobbetti
The chief executive designate of Burberry will not take the helm until the middle of the year – 12 months after his appointment was announced in a move that marked the end of Christopher Bailey’s unusual dual role as creative director and chief executive. Gobbetti won plaudits while running the French luxury brand Celine, and Bailey, who will become president and focus on his role as creative director, welcomed him with a promise of a “wonderfully collaborative relationship”. 2017 will be the test of that.
Jamie Dimon
As chief executive of America’s biggest bank, JP Morgan, Dimon’s words and actions will be of particular interest in the UK in 2017. In the run-up to the 23 June referendum, Dimon had warned that 4,000 jobs were at risk if there was a vote for Brexit. The bank employs 19,000 people across the UK in Canary Wharf, Bournemouth and Glasgow and any move by JP Morgan to start shifting jobs could set the tone for other banks.
Alex Cruz
Six months into taking control of British Airways in a management reshuffle, Cruz ended 2016 having staved off strike action by baggage handlers, check-in staff and cabin crew. The new year brings new challenges: he has already outlined plans to squeeze more passengers on to planes from 2018 and from 11 January will start charging economy customers on short-haul and domestic flights from Heathrow and Gatwick for M&S food.
